I understand that the Aid and Attendance VA Pension is tax free. PA has a Property Tax or Rent Rebate Program that is income based. If it is not considered for Income for the IRS then it should be excluded for these calculations for the PA-1000. Is this correct?

That is a state-specific tax question that is best posed to a local Pennsylvania tax expert.

Barring that, a phone call or email to the Pennsylavania tax department should get you a concise answer.